One contributor to large-scale unemployment in urban areas is
the minimum wage law. Although it may seem like a benign protocol implemented
for the sake of securing worker’s wages, it has a detrimental impact on
employment rates. This law removes any incentive on the part of business to
hire individuals who cannot justify the payment of a minimum wage. Sadly, in many areas throughout North America, this is the case. Assuming
that someone’s physical labour is only worth a fraction of what the government
demands that employers must pay them, a business would be employing this
individual on a financial deficit. Many unemployed persons cannot, despite their best
efforts, find adequate employment because the skills they posses (or lack
thereof) do not justify the payment of a minimum wage.
Consider the hypothetical case of some downtrodden denizen
living in the inner city of Detroit. This person has never finished high
school, is incapable of doing simple arithmetic, and possesses no employment
experience at any legitimate establishment. Undoubtedly, this individual will
have quite a challenging time finding employment because he possesses no skills
for which to justify a minimum wage. Assuming that his service at a fast food restaurant
or a gas station may only justify a wage of say, five dollars an hour, the minimum
wage law prevents him from receiving this due payment, and subsequently from attaining a job. This is
the case of many people across America who find themselves without a job; their
labour is not worth the minimum wage, and businesses have no incentive to hire
these people. A wage of five dollars an hour may seem dismal to some, but it is
a more desirable alternative than living in a box beneath an overpass.
Some would argue that if the minimum wage
were abolished tomorrow, then companies would start paying their employees at
dirt-cheap rates. This however is an exaggerated fallacy. Because the work
force is competitive, an employer who pays higher wages would have more
potential employees seeking to work for them, and would thus be more successful. You, as a worker would have more incentive to provide your labour to a company that pays you better. Nobody with a considerable education would prefer to work for dirt-cheap
if another business offered them higher wages. This
is just yet another instance in which the free market prevails over government
intervention.
